Wednesday, December 13, 2017

Rothbard vs. Kirzner on Entrepreneurship

This Rothbard essay strikes me as one of the very few times he was way off.

My copy of the essay, contained in Economic Controversies, is marked up with points I disagree with that make it look more like what a Paul Krugmancommentary I have marked up looks like than Rothbard.

The bottom line difference between my view and that of Rothbard is that I see the entrepreneur and the capitalist as two separate types of economic actors, which falls in line with Israel Kirzner's perspective where he identifies that the key function of the entrepreneur as being that of alertness to profit opportunities and acting on them---rather than, as an entrepreneur, having risk capital exposure.

Interestingly, Rothbard recognizes in his essay that the Misesian entrepreneur is in line with Kirzner's thinking:

While Mises basically links the capitalist and entrepreneur together in uncertainty-bearing, there are passages in Human Action which treat the entrepreneur as an entirely separate entity, and not just as the forecasting aspect of the capitalist or the laborer. In other words, there is a certain amount of textual justification in Mises for the Kirzner turn...

But somehow Rothbard can't see this split between entrepreneur and capitalist. At one point he writes:

Kirzner's entrepreneur is a curious formulation. He need not, apparently, risk anything.He is a free-floating wraith, disembodied from real objects. He does not, and need not, possess any assets. All he need have to earn profits is a faculty of alertness to profit opportunities. Since he need not risk any capital assets to meet the chancy fate of uncertainty, he cannot suffer any losses. But if the Kirznerian entrepreneur owns no assets, then how in the world does he earn profits?

My answer in my margin notes is "investment bankers." Investment bankers are one example of a type of entrepreneur who can earn profits without necessarily putting up any capital.

But there are many more real-world examples. It just seems to me that academics have a difficult time understanding this.